JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, New York 11788
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on December 5, 2002
--------------------------
To the Shareholders of JACO ELECTRONICS, INC.
Please be advised that the annual meeting of shareholders (the
"Annual Meeting") of Jaco Electronics, Inc., a New York corporation (the
"Company"), will be held on December 5, 2002, at 9:30 a.m., local time, at the
offices of the Company, 145 Oser Avenue, Hauppauge, New York 11788.
The Annual Meeting will be held for the following purposes:
1. To elect six Directors of the Company to hold office
until the next annual meeting of shareholders or until
their successors are duly elected and qualified;
2. To transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
November 1, 2002 as the record date for the determination of the shareholders
entitled to notice of and to vote at the Annual Meeting or any adjournment or
adjournments thereof. Only shareholders of record at the close of business on
the record date are entitled to notice of and to vote at the Annual Meeting.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN, AND
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE
MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME
BEFORE YOUR PROXY IS VOTED.
By Order of the Board of Directors,
Joel H. Girsky,
Date: November 8, 2002 Chairman
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, New York 11788
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Jaco Electronics, Inc. (the
"Company"), a New York corporation, of proxies to be voted at the annual meeting
of shareholders (the "Annual Meeting") to be held on December 5, 2002, at 9:30
a.m., local time, at the offices of the Company, 145 Oser Avenue, Hauppauge, New
York 11788, and any and all adjournments thereof.
The solicitation will be by mail, and the cost of such
solicitation, including the reimbursement of brokerage firms and others for
their expenses in forwarding proxies and proxy statements to the beneficial
owners of the Company's common stock, $0.10 par value per share (the "Common
Stock"), will be borne by the Company.
The shares of Common Stock represented by each duly executed
proxy received by the Board of Directors before the Annual Meeting will be voted
at the Annual Meeting as specified in the proxy. A shareholder may withhold
authority to vote for all of the nominees by marking the appropriate box on the
accompanying proxy card or may withhold authority to vote for an individual
nominee by striking a line through such nominee's name in the appropriate space
on the accompanying proxy card. The persons named in the enclosed proxy form
will vote the shares for which they are appointed in accordance with the
directions of the shareholders appointing them. In the absence of such
directions, such shares will be voted FOR Proposal 1 listed below and, in their
best judgment, will be voted on any other matters as may come before the Annual
Meeting. Shareholders who execute proxies nevertheless retain the right to
revoke them at any time before they are voted by submitting new proxies bearing
a later date, by submitting written revocations to the named proxies, or by
attending the Annual Meeting and voting thereat.
The principal executive offices of the Company are located at
145 Oser Avenue, Hauppauge, New York 11788. The telephone number of the Company
is (631) 273-5500. This Proxy Statement, the accompanying form of proxy, and the
2002 Annual Report to Shareholders, are first being sent to shareholders on or
about November 13, 2002 (the "Mailing Date").
VOTING SECURITIES AND RECORD DATE
The Board of Directors has designated November 1, 2002, as the
record date (the "Record Date") for determining the shareholders entitled to
notice of the Annual Meeting and to vote thereat. On the Record Date, the total
number of shares of Common Stock of the Company, outstanding and entitled to
vote was 5,807,432 (excluding 618,300 shares of treasury stock). The holders of
all outstanding shares of Common Stock are entitled to one vote for each share
of Common Stock registered in their names on the books of the Company at the
close of business on the Record Date. The presence in person or by proxy of a
majority of the outstanding shares of the Common Stock entitled to vote at the
Annual Meeting will be necessary to constitute a quorum. If
a quorum is present, a plurality vote of the shares of Common Stock present, in
person or by proxy, at the Annual Meeting and entitled to vote is required for
the election of any director in Proposal 1. All other matters submitted to a
vote of the shareholders require the affirmative vote of a majority of the
outstanding shares of Common Stock present at the Annual Meeting and entitled to
vote for approval. Abstentions and broker non-votes are not counted as votes
cast on any matter to which they relate. A broker non-vote occurs when a broker
or other nominee does not have discretionary authority and has not received
instructions with respect to a particular proposal.
In case a quorum shall not be present at the Annual Meeting, a
majority in interest of the shareholders entitled to vote at the Annual Meeting
present, in person or by proxy, shall have the power to adjourn such Annual
Meeting from time to time, without notice other than announcement at the Annual
Meeting until the requisite amount of shares of Common Stock entitled to vote
shall be present. Proxy ballots are received and tabulated by the Company's
transfer agent, American Stock Transfer and Trust Company, and certified by the
inspector of election.
PRINCIPAL SHAREHOLDERS; SHARES HELD BY MANAGEMENT
The following table sets forth the number and percentage of
shares of Common Stock owned as of November 1, 2002 by (i) each director of the
Company and each nominee for director, (ii) all persons who, to the knowledge of
the Company, are the beneficial owners of more than 5% of the outstanding shares
of Common Stock, (iii) each of the executive officers, and (iv) all of the
Company's directors and executive officers, as a group. Each person named in
this table has sole investment power and sole voting power with respect to the
shares of Common Stock set forth opposite such person's name, except as
otherwise indicated.
Aggregate Number of Shares
Name and Address of Beneficially Owned Percentage of Shares Beneficially
Beneficial Owner(1) Owned(2)
* Joel H. Girsky 1,128,640 (3)(4) 18.2%
* Joseph F. Oliveri 45,000 (4)(5) **
* Charles B. Girsky 531,360 (4)(6) 9.0%
* Stephen A. Cohen 34,683 (4)(7) **
* Edward M. Frankel 31,899 (4)(8) **
* Joseph F. Hickey, Jr. 37,149 (4)(9) **
Jeffrey D. Gash 62,298 (4)(10) 1.1%
Gary Giordano 37,500 (4)(11) **
Dimensional Fund Advisors 477,672 (12) 8.1%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Royce & Associates, LLC 660,150 (13) 11.4%
1414 Avenue of the Americas
New York, NY 10019
All directors and executive officers as a 1,908,529 (14) 29.4%
group (8 persons)
- ---------------------------------
* Nominee for election to the Board of Directors.
** Less than one percent.
(1) Unless otherwise indicated, the address of each person listed is 145 Oser
Avenue, Hauppauge, New York, 11788.
(2) Assumes a base of 5,807,432 shares of Common Stock outstanding, before any
consideration is given to outstanding options.
(3) Includes (i) 360,000 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's 1993 Non-Qualified
Stock Option Plan, (ii) 50,000 shares of Common Stock acquirable pursuant
to options exercisable within 60 days granted under the Company's 2000
Stock Option Plan, and (iii) 37,500 shares of Common Stock awarded under
the Company's Restricted Stock Plan.
(4) Does not include 25,000 shares of Common Stock acquirable pursuant to
options that are not exercisable within 60 days granted under the Company's
2000 Stock Option Plan.
(5) Includes (i) 30,000 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's 1993 Non-Qualified
Stock Option Plan, and (ii) 15,000 shares of Common Stock acquirable
pursuant to options exercisable within 60 days granted under the Company's
2000 Stock Option Plan.
(6) Includes (i) 352,815 shares of Common Stock owned by the Girsky Family
Trust, (ii) 52,500 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's 1993 Non-Qualified
Stock Option Plan, (iii) 25,000 shares of Common Stock acquirable pursuant
to options exercisable within 60 days granted under the Company's 2000
Stock Option Plan, and (iv) 37,500 shares of Common Stock awarded under the
Company's Restricted Stock Plan.
(7) Includes (i) 11,250 shares of Common Stock acquirable pursuant to
non-qualified stock options exercisable within 60 days granted to Mr. Cohen
by the Company, (ii) 11,250 shares of Common Stock acquirable pursuant to
options exercisable within 60 days granted under the Company's 1993
Non-Qualified Stock Option Plan, and (iii) 5,000 shares of Common Stock
acquirable pursuant to options exercisable within 60 days granted under the
Company's 2000 Stock Option Plan.
(8) Includes (i) 4,399 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's Outside Directors'
Plan, (ii) 11,250 shares of Common Stock acquirable pursuant to
non-qualified stock options exercisable within 60 days granted to Mr.
Frankel by the Company, (iii) 11,250 shares of Common Stock acquirable
pursuant to options exercisable within 60 days granted under the Company's
1993 Non-Qualified Stock Option Plan, and (iv) 5,000 shares of Common Stock
acquirable pursuant to options exercisable within 60 days granted under the
Company's 2000 Stock Option Plan.
(9) Includes (i) 4,399 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's Outside Directors'
Plan, (ii) 11,250 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's 1993 Non-Qualified
Stock Option Plan, and (iii) 5,000 shares of Common Stock acquirable
pursuant to options exercisable within 60 days granted under the Company's
2000 Stock Option Plan.
(10) Includes (i) 30,000 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's 1993 Non-Qualified
Stock Option Plan, (ii) 15,000 shares of Common Stock acquirable pursuant
to options exercisable within 60 days granted under the Company's 2000
Stock Option Plan, and (iii) 15,000 shares of Common Stock awarded under
the Company's Restricted Stock Plan.
(11) Includes (i) 15,000 shares of Common Stock acquirable pursuant to options
exercisable within 60 days granted under the Company's 1993 Non-Qualified
Stock Option Plan, (ii) 15,000 shares of Common Stock acquirable pursuant
to options exercisable within 60 days granted under the Company's 2000
Stock Option Plan, and (iii) 7,500 shares of Common Stock awarded under the
Company's Restricted Stock Plan.
(12) These securities are held in investment advisory accounts of Dimensional
Fund Advisors, Inc. This information is based upon an amendment to Schedule
13G dated, January 30, 2002, and information made available to the Company.
(13) The information is based upon a Schedule 13G dated July 10, 2002, and
information made available to the Company.
(14) Includes 687,548 shares of Common Stock acquirable pursuant to options
exercisable within 60 days and 97,500 shares of Common Stock awarded under
the Company's Restricted Stock Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors are to be elected to serve until the next annual
meeting of shareholders or until their successors are elected and qualified.
Directors shall be elected by shareholders holding a plurality of the shares of
Common Stock present at the Annual Meeting. It is the intention of the persons
named in the form of proxy, unless authority is withheld, to vote the proxies
given them for the election of all nominees hereinafter named, all of whom are
presently directors of the Company. In the event, however, that any one of them
is unable or declines to serve as a director, the appointees named in the form
of proxy reserve the right to substitute another person of their choice as
nominee, in his place and stead, or to vote for such lesser number of directors
as may be presented by the Board of Directors in accordance with the Company's
By-Laws.
The nominees for the Board of Directors of the Company are as
follows:
Stephen A. Cohen
Edward M. Frankel
Charles B. Girsky
Joel H. Girsky
Joseph F. Hickey, Jr.
Joseph F. Oliveri
Information about the foregoing nominees is set forth under
"Management" below.
Unless marked to the contrary, the shares of Common Stock
represented by the enclosed Proxy will be voted FOR the election of the nominees
named above as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
The Board of Directors held five meetings during the fiscal
year ended June 30, 2002 ("Fiscal 2002"). Each director (during the period in
which each such director served) attended at least seventy-five (75%) percent of
the aggregate of (i) the total number of meetings of the Board of Directors and
(ii) the total number of meetings held by all committees of the Board of
Directors on which the director served.
Board Committees
The Board of Directors has a standing Audit Committee and a
standing Compensation Committee. The entire Board of Directors administered the
Company's 1993 Non-Qualified Stock Option Plan, Restricted Stock Plan and 2000
Stock Option Plan during Fiscal 2002. The Audit Committee is responsible for
reviewing the accounting principles, policies and practices followed by the
Company in accounting for and reporting its financial results of operations and
for selecting and meeting with the Company's independent accountants. The Audit
Committee reviews with members of the Company's accounting department and the
independent auditors accounting, auditing and financial reporting matters and
the Company's internal accounting controls. The Audit Committee operates under a
written Audit Committee Charter adopted by the Board. The Audit Committee held
five meetings during Fiscal 2002. The Audit Committee currently consists of
Messrs. Hickey, Frankel and Cohen. The Board has determined that each of the
members of the Audit Committee is an "independent director" as defined in Rule
4200 of the listing standards of the National Association of Securities Dealers,
Inc.
The Compensation Committee makes recommendations to the Board of Directors
concerning compensation arrangements for directors, executive officers, and
senior management of the Company. The Compensation Committee did not meet during
Fiscal 2002. The Compensation Committee is comprised of Mr. Frankel and Mr.
Hickey.
MANAGEMENT
Executive Officers and Directors
The current directors and executive officers of the Company,
their ages, their positions and terms of office with the Company are set forth
below.
Name Age Position
* Joel H. Girsky.............................. 63 Chairman of the Board, President and Treasurer
* Joseph F. Oliveri........................... 53 Vice Chairman of the Board and Executive Vice President
* Charles B. Girsky........................... 68 Executive Vice President and Director
Jeffrey D. Gash............................ 50 Executive Vice President, Finance and Secretary
Gary Giordano.............................. 45 Executive Vice President
* Stephen A. Cohen............................ 65 Director
* Edward M. Frankel........................... 64 Director
* Joseph F. Hickey, Jr........................ 44 Director
- ---------------
* Nominee for election to the Board of Directors.
Joel H. Girsky has been a Director and executive officer of the Company
since it was founded in 1961. He also is a director of Frequency Electronics,
Inc. of Uniondale, New York. Messrs. Joel H. Girsky and Charles B. Girsky are
brothers.
Joseph F. Oliveri became Vice Chairman of the Board of Directors and an
Executive Vice President in June 2000. From March 1983 to June 2000 he was
President and Chief Executive Officer of Interface Electronics Corp.
("Interface"). The Company acquired Interface in June 2000.
Charles B. Girsky was a founder, Director, and President of the Company
from 1961 through January 1983. He became an executive officer again in August
1985 and has been an Executive Vice President since January 1988. He has been a
Director since 1986. Messrs. Charles B. Girsky and Joel H. Girsky are brothers.
Jeffrey D. Gash became an Executive Vice President, Finance in October
2000. He became Vice President of Finance in January 1989, and was Controller of
the Company for more than five years prior thereto. In September 1999, he became
Secretary of the Company. He has also served in similar capacities with the
Company's subsidiaries.
Gary Giordano became Executive Vice President in June 2000. From February
1992 to June 2000 he was a Vice President of Sales and Marketing.
Stephen A. Cohen has been a Director since 1970. Since August 1989, he has
practiced law as a member of Morrison Cohen Singer & Weinstein, LLP, the
Company's general counsel.
Edward M. Frankel became a Director in May 1984. Since December 1999, he
has been Chairman of the Board of Vitaquest International, Inc., a distributor
of vitamins and health and beauty products. For more than five years prior
thereto, he served as President of Vitaquest and its predecessor entities.
Joseph F. Hickey, Jr. became a Director in May 1997. From February 1991 to
April 2001, he was employed by Tucker Anthony Sutro Capital Markets, a national
investment banking firm which merged with RBC Dain Rauscher Corp. in March 2002.
He was a managing director in Tucker Anthony's investment banking department. He
is currently a Regional Managing Director at Hopewell Ventures, L.P., a venture
capital firm.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain information concerning
the compensation paid or accrued by the Company for services rendered to the
Company in all capacities for the fiscal years ended June 30, 2002, 2001 and
2000, by its Chief Executive Officer and each of the Company's other executive
officers whose total salary and bonus exceeded $100,000 during the fiscal year
ended June 30, 2002 ("Fiscal 2002"):
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
----------------------------------------------- ------------------------------------------------------
Awards Payouts
------ -------
Restricted
Name and Other Annual Stock Options/ LTIP All Other
Principal Position Year Salary($)(1) Bonus($) Compensation ($)(2) Awards($)(3)(4) SARs(#)(4) Payouts($) Compensation($)(5)
- ------------------ ---- ------------ -------- ------------------- --------------- ---------- ---------- ------------------
Joel H. Girsky 2002 346,900 -- -- -- -- -- 151,633
Chairman of the Board 2001 325,000 720,000 -- -- 50,000 -- 59,083
President, and Treasurer 2000 325,000 648,100 -- -- 60,000 -- 66,709
Joseph F. Oliveri (6) 2002 277,500 60,700 -- -- -- -- 414
Vice Chairman and 2001 300,000 175,500 -- -- 15,000 -- 207
Executive Vice President 2000 20,770 15,700 -- -- 30,000 -- --
Charles B. Girsky 2002 231,300 -- -- -- -- -- 2,344
Executive Vice President 2001 225,000 360,000 -- -- 25,000 -- 2,286
2000 225,000 324,000 -- -- 15,000 -- 6,831
Jeffrey D. Gash 2002 148,000 10,800 -- -- -- -- 2,964
Executive Vice 2001 152,500 50,800 -- -- 15,000 -- 1,124
President, Finance and 2000 136,000 60,800 -- -- 15,000 -- 4,953
Secretary
Gary Giordano(7) 2002 185,000 -- -- -- -- -- 1,853
Executive Vice President 2001 184,300 43,600 -- -- 15,000 -- 1,180
2000 158,000 40,000 -- -- 15,000 -- 1,971
(1) Effective October 1, 2001, each named executive officer voluntarily agreed
to a temporary 10% salary reduction. See description of employment
agreements on pages 10 through 12.
(2) The costs of certain benefits are not included because they did not exceed,
in the case of each named executive officer, the lesser of $50,000 or ten
percent of the total annual salary and bonus reported in the above table.
(3) On June 9, 1997, the Board of Directors awarded an aggregate of 97,500
shares of Common Stock under the Company's Restricted Stock Plan to its
executive officers as follows: 37,500 shares of Common Stock to Mr. Joel
Girsky, 37,500 shares of Common Stock to Mr. Charles Girsky, 15,000 shares
of Common Stock to Mr. Jeffrey Gash and 7,500 shares of Common Stock to Mr.
Gary Giordano. These grants were subject to the approval of the Company's
shareholders, which approval was received on December 9, 1997. The awards
vested in one-quarter increments annually. Accordingly, as of June 30,
2002, all of the aforementioned awards were vested. The value of the
aggregate restricted stock holdings of these individuals at June 30, 2002
was as follows: $151,250 for Mr. Joel Girsky, $151,250 for Mr. Charles
Girsky, $60,500 for Mr. Jeffrey Gash and $30,250 for Mr. Gary Giordano.
These figures are based upon the fair market value per share of the
Company's Common Stock at June 30, 2002, minus the purchase price of such
awards. The closing sale price for the Company's Common Stock as of June
30, 2002 on the Nasdaq National Market was $4.70.
(4) Adjusted to give effect to a 3-for-2 stock split which was effective on
July 24, 2000.
(5) Includes 401(k) matching contributions, premiums paid on group term life
insurance, the taxable portion of split dollar life insurance policies and,
in the case of Mr. Joel Girsky, the cash surrender value of life insurance
policies transferred and deferred compensation accrued in connection with
his employment agreement with the Company. 401(k) matching contributions
for Fiscal 2002 for the Named Executives were as follows: Mr. Joel Girsky -
$1,168, Mr. Oliveri - $0, Mr. Charles Girsky - $1,125, Mr. Gash - $2,131
and Mr. Giordano - $1,673. Premiums paid on group term life insurance for
Fiscal 2002 for the Named Executives were as follows: Mr. Joel Girsky -
$1,188, Mr. Oliveri - $414, Mr. Charles Girsky - $1,219, Mr. Gash - $270
and Mr. Giordano - $180. The taxable portion of split dollar life insurance
policies for Mr. Joel Girsky was $8,060 and for Mr. Gash was $563 for
Fiscal 2002. The cash surrender value of the policies transferred to Mr.
Girsky for Fiscal 2002 was $91,217. $50,000 deferred compensation was
accrued in Fiscal 2002 in connection with Mr. Joel Girsky's employment
agreement with the Company.
(6) Mr. Oliveri became an Executive Vice President of the Company on June 6,
2000.
(7) Mr. Giordano became an Executive Vice President of the Company on June 22,
2000.
Employment Agreements
The Company entered into a four-year employment agreement with
Joel Girsky, effective as of July 1, 2001, to serve as the Company's Chairman
and President. The employment agreement, will automatically renew for additional
one-year periods on each anniversary date, unless notice is given 90 days prior
to an anniversary date. In the event that a notice of non-renewal is delivered
by either party, Mr. Girsky's employment agreement shall continue for a period
of three years following the anniversary date which follows immediately after
the date that such notice is delivered. However, in the event that a notice of
non-renewal is delivered by either party at such time as Mr. Girsky is at least
70 years of age, then the employment agreement shall continue for a period of
only one year following the anniversary date which follows immediately after the
date that such notice is delivered. Mr. Joel Girsky receives a base salary of
$375,000 for each fiscal year ending June 30. In addition, he is entitled to
receive a cash bonus equal to four percent of the Company's earnings before
income taxes for each fiscal year in which such earnings are between $1.0
million and $2.5 million, or six percent of the Company's earnings before income
taxes for such fiscal year if such earnings are in excess of $2.5 million up to
a maximum annual cash bonus of $720,000. If the Company's earnings before income
taxes are in excess of $12.0 million for any such fiscal year, Mr. Girsky may
also receive stock options. Mr. Girsky or his estate, as the case may be, is
entitled to receive a payment of $375,000 if he dies or becomes permanently
disabled during the term of the employment agreement. The death benefit of
$1.5 million provided for in the prior employment agreement was being funded by
life insurance policies maintained by the Company, which policies were
transferred to Mr. Girsky. Mr. Girsky also receives deferred compensation which
accrues at the rate of $50,000 per year, and becomes payable in a lump sum at
the cessation of his employment, with or without cause, at any time. In the
event of a change in control, Mr. Girsky will receive 299% of the average of his
base salary plus cash bonus for the previous five years, to the extent that such
payment does not equal or exceed three times Mr. Girsky's base amount, as
computed in accordance with Section 280G(d)(4) of the Internal Revenue Code of
1986. Additionally, upon a change of control, Mr. Girsky's employment agreement
may be assigned by the Company or any such successor or surviving corporation
with the prior written consent of Mr. Girsky. Commencing upon the termination of
Mr. Girsky's employment with Jaco, and ending on the later to occur of Mr.
Girsky's death or his spouse's death, Jaco will permit Mr. Girsky and his spouse
to the extent eligible, to participate in the health and medical benefit program
provided by Jaco to senior executive officers.
The Company entered into a three-year employment agreement
with Joseph F. Oliveri, effective as of June 6, 2000. The employment agreement
will automatically renew for additional one-year periods unless notice is given
90 days prior to an anniversary date. Mr. Oliveri receives a base salary at an
annual rate of $300,000. In addition, he is entitled to receive a cash bonus
equal to two percent of Interface's gross profit from certain customers for each
twelve month period beginning June 1, 2000, June 2, 2001 and June 1, 2002. The
employment agreement, as amended, provides that in the event of a change in
control prior to May 30, 2003, Mr. Oliveri will receive 200% of his base salary
plus cash bonus earned during the twelve months prior to the change of control.
The Company entered into a four-year employment agreement with
Charles Girsky, effective as of July 1, 2001, to serve as the Company's
Executive Vice President. The employment agreement will automatically renew for
additional one-year periods on each anniversary date, unless notice is given 90
days prior to an anniversary date. In the event that a notice of non-renewal is
delivered by either party, Mr. Girsky's employment agreement shall continue for
a period of three years following the anniversary date which follows immediately
after the date that such notice is delivered. However, in the event that a
notice of non-renewal is delivered by either party at such time as Mr. Girsky is
at least 70 years of age, then the employment agreement shall continue for a
period of only one year following the anniversary date which follows immediately
after the date that such notice is delivered. Mr. Girsky receives a base salary
of $250,000 for each fiscal year ending June 30. In addition, he is entitled to
receive a cash bonus equal to two percent of the Company's earnings before
income taxes for each fiscal year in which such earnings are between $1.0
million and $2.5 million, or three percent of the Company's earnings before
income taxes for such fiscal year if such earnings are in excess of $2.5 million
up to a maximum annual cash bonus of $360,000. If the Company's earnings before
income taxes are in excess of $12.0 million for any such fiscal year, Mr. Girsky
may also receive stock options. Mr. Girsky or his estate, as the case may be, is
entitled to receive a payment of $250,000 if he dies during the term of the
employment agreement. The death benefit of $1.0 million provided for in the
prior employment agreement was being funded by a life insurance policy
maintained by the Company, which policy was transferred to Mr. Girsky. In the
event of a change in control, Mr. Girsky will receive 250% of the average of his
base salary plus cash bonus for the previous five years, to the extent that such
payment does not equal or exceed three times Mr. Girsky's base amount, as
computed in accordance with Section 280G(d)(4) of the Internal Revenue Code of
1986. Additionally, upon a change of control, Mr. Girsky's employment agreement
may be
assigned by the Company or any such successor or surviving corporation
with the prior written consent of Mr. Girsky. Commencing upon the termination of
Mr. Girsky's employment with Jaco, and ending on the later to occur of Mr.
Girsky's death or his spouse's death, Jaco will permit Mr. Girsky and his spouse
to the extent eligible, to participate in the health and medical benefit program
provided by Jaco to senior executive officers.
The Company entered into a four-year employment agreement with
Jeffrey Gash, effective as of July 1, 1998, to serve as the Company's Executive
Vice President of Finance. The employment agreement will automatically renew for
additional one-year periods on each anniversary date, unless notice is given 90
days prior to an anniversary date. In the event that a notice of non-renewal is
delivered by either party, Mr. Gash's employment agreement shall continue for a
period of three years following the anniversary date which follows immediately
after the date that such notice is delivered. Pursuant to the agreement, as
amended, Mr. Gash receives a base salary of $160,000 for each fiscal year ending
June 30. In addition, he is entitled to receive a cash bonus as determined by
the Board of Directors and the President. Mr. Gash or his estate, as the case
may be, is entitled to receive a payment of $750,000 if he dies during the term
of the employment agreement. The death benefit is currently being funded by a
life insurance policy maintained by the Company. In the event of Mr. Gash's
cessation of employment with the Company, upon his request, the Company is
obligated to transfer such policy to Mr. Gash. Thereafter, the Company would
have no further liability for the payment of such benefit or the premiums on
such policy. In the event of a change in control, Mr. Gash will receive 200% of
the average of his base salary plus cash bonus for the previous five years, to
the extent that such payment does not equal or exceed three times Mr. Gash's
base amount, as computed in accordance with Section 280G(d)(4) of the Internal
Revenue Code of 1986. Additionally, upon a change of control, Mr. Gash's
employment agreement may be assigned by the Company or any such successor or
surviving corporation with the prior written consent of Mr. Gash.
The Company entered into an agreement with Gary Giordano dated
as of July 20, 1998, which provides a lump sum payment to him in the event of a
change in control. If Mr. Giordano's employment with the Company or a successor
or surviving corporation is terminated other than for cause (commission by Mr.
Giordano of an act constituting common law fraud or a felony), for a period of
up to two years after the change in control event, he will receive up to 200% of
the average of his base salary plus cash bonus for the previous three years
based upon a formula. The payment will be made to Mr. Giordano to the extent
such payment does not exceed Mr. Giordano's base amount as computed in
accordance with Section 280G(d)(4) of the Internal Revenue Code of 1986. The
agreement also requires Mr. Giordano to refrain from disclosing proprietary or
confidential information obtained by him. The agreement does not obligate the
Company to retain the services of Mr. Giordano.
Option Grants
There were no stock options granted during the fiscal year
ended June 30, 2002.
Option Exercises and Fiscal Year-End Option Values
AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Shares Number of Unexercised Value of Unexercised In-
Acquired Value Option/SARs at FY-End the-Money Option/SARs at
On Exercise Realized (#)(1) FY-End($)(2)
------------ ---------
Name (#)(1) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------ --- ----------- ------------- ----------- -------------
Joel H. Girsky 23,098 24,800 410,000 -- 815,700 --
Joseph F. Oliveri -- -- 45,000 -- -- --
Charles B. Girsky 37,500 40,200 77,500 -- 142,100 --
Jeffrey D. Gash -- -- 45,000 -- 76,600 --
Gary Giordano -- -- 30,000 -- 33,000 --
(1) Adjusted to give effect to a 3-for-2 stock split which was effective on
July 24, 2000.
(2) Based on the fair market value per share of the Common Stock at year end,
minus the exercise or base price on "in-the-money" options. The closing
sale price for the Company's Common Stock as of June 30, 2002 on the Nasdaq
National Market was $4.70.
Director Compensation
Pursuant to the Company's 1993 Stock Option Plan for Outside Directors,
each outside director was granted on each December 31 subsequent to December 31,
1993 stock options to purchase 4,399 shares of Common Stock. All options granted
under the Outside Directors' Plan were immediately exercisable, and the exercise
price per share of each option was equal to the fair market value of the shares
of Common Stock on the date of grant. No option was granted after January 1,
1998 under the Outside Directors' Plan.
On September 16, 1998, each of Messrs. Cohen and Frankel was granted
options to purchase 11,250 shares of Common Stock. The options became
exercisable one year from the date of grant and expire on September 15, 2003.
The per share exercise price of each option is equal to the closing price of the
Common Stock on the date of grant, or $2.75 per share.
On September 15, 1999, the Company granted each of Mr. Stephen A. Cohen,
Mr. Edward M. Frankel and Mr. Joseph F. Hickey, Jr., five year options to
purchase 11,250 shares of Common Stock at an exercise price of $2.50 per share.
The per share exercise price of each option is equal to the closing price of the
Common Stock on the date of grant. The options vest on the one-year anniversary
date of the date of grant and were issued pursuant to the Company's 1993
Non-Qualified Stock Option Plan.
On December 12, 2000, the Company granted each of Mr. Stephen A. Cohen, Mr.
Edward M. Frankel and Mr. Joseph F. Hickey, Jr., ten year options to purchase
5,000 shares of Common Stock at an exercise price of $8.00 per share. The per
share exercise price of each option is equal to the closing price of the Common
Stock on the date of grant. The options vest on the one-year anniversary date of
the date of grant and were issued pursuant to the Company's 2000 Stock Option
Plan.
On November 1, 2002, the Company granted each of Mr. Stephen A. Cohen, Mr.
Edward M. Frankel and Mr. Joseph F. Hickey, ten year options to purchase 25,000
shares of Common Stock at an exercise price of $2.35 per share. The per share
exercise price of each option is equal to the closing price of the Common Stock
on the date of grant. The options vest on the one-year anniversary date of the
date of grant and were issued pursuant to the Company's 2000 Stock Option Plan.
Employment Contracts and Termination of Employment
and Change-In-Control Arrangements
The Company's employment agreements with Messrs. Joel Girsky, Charles
Girsky, Jeffrey Gash and Joseph Oliveri, and the change-in-control agreement
with Gary Giordano are described on pages 10 through 12 of this Proxy Statement.
Compensation Committee Interlocks and Insider Participation
Joseph F. Hickey, Jr., a Director and member of the Compensation Committee,
was a managing director of Tucker Anthony Sutro Capital Markets through April
2001, which firm rendered services to the Company from time to time. Tucker
Anthony Sutro Capital Markets merged with RBC Dain Rauscher Corp. in March 2002.
Compliance with Section 16(a) of Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers, and persons who beneficially own
more than ten percent of the Company's Common Stock to file with the Securities
and Exchange Commission initial reports of beneficial ownership on Form 3 and
reports of changes in beneficial ownership on Form 4 or Form 5. Executive
officers, directors, and ten percent shareholders are required to furnish the
Company with copies of such forms. Based solely on a review of such forms
furnished to the Company and written representations from certain reporting
persons, the Company believes that during Fiscal 2002, the Company's executive
officers, directors, and ten percent shareholders complied with all applicable
Section 16(a) filing requirements.
Board Compensation Committee Report on Executive Compensation
Introduction
The Compensation Committee of the Board of Directors of the
Company (the "Committee") is composed of non-employee Directors. The Committee
is responsible for determining and administering the Company's compensation
policies for the remuneration of the Company's senior executive officers
(collectively, "Executives"). In determining the cash and non-cash compensation
of Executives, the Committee annually evaluates both individual and corporate
performance from both a short-term and long-term perspective.
A number of the Company's Executives have entered into
employment agreements with the Company. For Fiscal 2002, Messrs. Joel Girsky and
Charles Girsky did not receive cash bonuses and Mr. Joseph Oliveri did receive a
cash bonus, as determined based upon a formula contained in each of their
employment agreements. In addition, Mr. Gash did receive a cash bonus for Fiscal
2002. See "Executive Compensation and Other Information."
Philosophy
The Company's compensation program for Executives (the
"Program") seeks to encourage the achievement of business objectives of the
Company and superior corporate performance by the Company's Executives. The
Program enables the Company to reward and retain highly qualified executives and
to foster a performance-oriented environment wherein management's long-term
focus is on maximizing shareholder value through the use of equity-based
incentives. The Program calls for consideration of the nature of each
Executive's work and responsibilities, his or her leadership and technical
skills, unusual accomplishments or achievements on the Company's behalf, years
of service, the Executive's total compensation package (cash and non-cash
compensation) and the Company's financial condition generally.
Components of Executive Compensation
Historically, the Company's executive employees have received
cash-based and equity-based compensation. The Company attempts to pay its
executive officers competitively in order that it may retain the most capable
people in the industry.
Cash-Based Compensation: Base salary represents the primary
cash component of an Executive's compensation, and is determined by evaluating
the responsibilities associated with an Executive's position at the Company and
his or her overall level of experience. In addition, the Committee, in its
discretion, may award bonuses. The Committee believes that the Executives are
best motivated through a combination of stock option awards and cash incentives.
Equity-Based Compensation: Equity-based compensation
principally has been in the form of stock options, granted pursuant to the
Company's 2000 Stock Option Plan and 1993 Non-Qualified Plan and awards of
shares of Common Stock under the Company's Restricted Stock Plan. The Committee
believes that stock options represent an important component of a well-balanced
compensation program. Because stock option awards provide value only in the
event of share price appreciation, stock options enhance management's focus on
maximizing long term shareholder value, and thus provide a direct relationship
between an executive's
compensation and the shareholders' interests. No specific
formula is used to determine option awards for an Executive. Rather, individual
award levels are based upon the subjective evaluation of each Executive's
overall past and expected future contributions to the success of the Company.
Additionally, the Committee believes that awards under the Restricted Stock Plan
will enhance the alignment of an Executive's interest with that of the
shareholders, because the Executive may be able to realize greater value with
increased stock performance.
Compensation of the Chief Executive Officer
The philosophy, factors, and criteria of the Committee
generally applicable to the Company's senior management is applicable to the
Chief Executive Officer.
This report is submitted by the Compensation Committee.
Edward M. Frankel
Joseph F. Hickey, Jr.
Directors' and Officers' Liability Insurance
The Company has purchased directors' and officers' liability
insurance policies, as permitted by Article 7 of the New York Business
Corporation Law. National Union Insurance Company issued a policy, which
provides coverage of $5,000,000 for an annual premium of $100,000. XL Specialty
Insurance Company issued an excess policy, which provides an additional
$5,000,000 of coverage for an annual premium of $60,000. Both policies have an
expiration date of February 2003, and each policy is expected to be renewed on
that date.
Audit Committee Report
The information contained in this report shall not be deemed
to be "soliciting material" or "filed" or incorporated by reference in future
filings with the Securities and Exchange Commission, or subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), except to the extent that the Company specifically
incorporates it by reference into a document filed under the Securities Act of
1933, as amended, or the Exchange Act.
The Audit Committee has reviewed and discussed with the
Company's management the audited consolidated financial statements of the
Company contained in the Company's Annual Report on Form 10-K for Fiscal 2002.
The Audit Committee has also discussed with Grant Thornton LLP the matters
required to be discussed pursuant to SAS No. 61 (Codification of Statements on
Auditing Standards, AU Section 380), which includes, among other items, matters
related to the conduct of the audit of the Company's consolidated financial
statements.
The Audit Committee has received and reviewed the written
disclosures from Grant Thornton LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has
discussed with Grant Thornton LLP its independence from the Company.
Based on the review and discussions referred to above, the
Audit Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for its Fiscal 2002 for filing with the Securities and Exchange
Commission.
This report is submitted by the Audit Committee.
Joseph F. Hickey, Jr.
Edward M. Frankel
Stephen A. Cohen
Comparative Stock Performance Graph
The following is a graph comparing the annual percentage
change in the cumulative total shareholder return of the Company's Common Stock
with the cumulative total returns of the published Dow Jones US Total Market
Index and Dow Jones US Industrial Services, All Index for the Company's last
five (5) fiscal years:
[GRAPH]
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
Jaco Electronics, Inc. 100 86.52 57.39 306.09 128.13 98.08
Dow Jones US Total Market 100 128.97 155.62 170.36 144.62 118.46
Dow Jones US Industrial Services, 100 118.12 127.57 107.77 90.02 85.32
All
INDEPENDENT AUDITORS
Grant Thornton LLP has audited the Company's financial
statements annually since the fiscal year ended June 30, 1984. The Board of
Directors expects that representatives of Grant Thornton LLP will be present at
the Annual Meeting, will be afforded an opportunity to make a statement, and
will be available to respond to appropriate inquiries from shareholders.
AUDIT FEES
Grant Thornton LLP has billed the Company $188,750, in the
aggregate, for professional services rendered by Grant Thornton LLP for the
audit of the Company's annual financial statements for Fiscal 2002 and the
reviews of the interim financial statements included in the Company's Quarterly
Reports on Form 10-Q for Fiscal 2002.
ALL OTHER FEES
Grant Thornton LLP has billed the Company $86,350, in the
aggregate, for professional services rendered by Grant Thornton LLP for all
services other than those services covered in the sections captioned "Audit
Fees" for Fiscal 2002. These other services include (i) tax planning and
assistance with the preparation of returns, (ii) services rendered in connection
with acquisitions by the Company, (iii) assistance with regulatory filings, and
(iv) consultations on the effects of various accounting issues and changes in
professional standards.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Grant Thornton LLP was not engaged to perform any services
involving financial information systems design and implementation for Fiscal
2002.
For Fiscal 2002, the Audit Committee has determined that the
non-audit services performed by Grant Thornton LLP is compatible with
maintaining the independence of Grant Thornton LLP.
CERTAIN TRANSACTIONS
During Fiscal 2002, the Company paid approximately $659,000 of rental
expenses in connection with the Company's main headquarters and centralized
inventory distribution facility, located in Hauppauge, New York, which was paid
to Bemar Realty Company, the owner of such premises. Bemar is a partnership
consisting of Messrs. Joel Girsky and Charles Girsky, both of whom are officers,
directors and principal shareholders of the Company. The lease on the property,
which is net of all expenses, including taxes, utilities, insurance, maintenance
and repairs was renewed on January 1, 1996 and expires on December 31, 2003. The
Company believes the current rental rate is at its fair market value.
Joseph F. Oliveri, the Company's Vice Chairman of the Board and an
Executive Vice President, had served as a director of EMC Corporation, a public
company, from March 1993 to October 9, 2001. Mr. Oliveri was also the President
and Chief Executive Officer of Interface
from March 1983 until June 2000, when it was acquired by the Company. Interface
sells components to contract manufacturers which incorporate such components
into products sold to EMC. Mr. Oliveri was a 40% stockholder of Interface, and
therefore, upon the acquisition of Interface, Mr. Oliveri received his
proportionate share of both the $15,400,000 purchase price paid by the Company
at the closing, and the deferred payments made subsequent to the closing in the
aggregate amount of $5,002,860.
Joseph F. Hickey, Jr., a Director, was also a managing director of Tucker
Anthony Sutro Capital Markets through April 2001, which firm rendered services
to the Company from time to time. Tucker Anthony Sutro Capital Markets merged
with RBC Dain Rauscher Corp. in March 2002.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING
Shareholder Proposals. Proposals of shareholders intended to
be presented at the Company's 2003 Annual Shareholder Meeting (i) must be
received by the Company at its offices no later than August 15, 2003, (ii) may
not exceed 500 words and (iii) must otherwise satisfy the conditions established
by the Commission for shareholder proposals to be included in the Company's
Proxy Statement for that meeting.
Discretionary Proposals. Shareholders intending to commence
their own proxy solicitations and present proposals from the floor of the 2003
Annual Shareholder Meeting in compliance with Rule 14a-4 promulgated under the
Securities Exchange Act of 1934, as amended, must notify the Company before
October 2, 2003 of such intentions. After such date, the Company's proxy in
connection with the 2003 Annual Shareholder's Meeting may confer discretionary
authority on the Board to vote.
GENERAL
The Board of Directors knows of no other matters which are
likely to be brought before the Annual Meeting. If, however, any other matters
are properly brought before the Annual Meeting, the persons named in the
enclosed proxy or their substitutes shall vote thereon in accordance with their
judgment pursuant to the discretionary authority conferred by the form of proxy.
By Order of the Board of Directors,
Joel H. Girsky,
Chairman
Hauppauge, New York
November 12, 2002
PROXY
JACO ELECTRONICS, INC.
145 OSER AVENUE, HAUPPAUGE, NEW YORK 11788
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned constitutes and appoints Joel H. Girsky and Charles B.
Girsky, and each of them, proxies of the undersigned (the "Proxies") with the
power to appoint a substitute, and to represent and vote all shares of common
stock of Jaco Electronics, Inc. (the "Company"), $.10 par value per share (the
"Common Stock"), which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders to be held on Thursday, December
5, 2002, and all adjournments thereof, as follows:
(Continued and to be signed on the reverse side)
A (X) Please mark your votes as in this example.
<s> <c> <c> <c>
1. To vote on the election of each FOR all nominees WITHHOLD AUTHORITY to Nominees: Stephen A. Cohen
of the following nominees to the listed at right vote for all nominees Edward M. Frankel
Board of Directors, as indicated: (except as marked to listed at right Charles B. Girsky
the contrary) Joel H. Girsky
(Instructions: To withhold authority Joseph F. Hickey, Jr.
to vote for any individual nominee, (_) (_) Joseph F. Oliveri
strike a line through the nominee's
name in the list at right.)
2. To vote, in the discretion of
the Proxies, on such other matters
as may properly come before the
meeting.
The shares of Common Stock represented by this Proxy shall be voted as directed
above by the shareholder. In the absence of such direction, the shares of
Common Stock shall be voted FOR the matter set forth in Item 1.
Receipt of the Notice of Annual Meeting, the Proxy Statement and the Annual
Report to Shareholders is hereby acknowledged.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
Signature:______________________
Signature if held jointly:___________________________ Dated:___________, 2002
NOTE: Please sign as name appears hereon. If signing as attorney, executor,
administrator, trustee, guardian or other fiduciary, please give full
title as it appears. If shares of Common Stock are held jointly, each
named shareholder should sign. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.